Upconversion refers to non-linear optical processes that convert two or more low-energy pump photons to a higher-energy output photon. After being recognized in the mid-1960s, upconversion has attracted significant research interest for its applications in optical devices such as infrared quantum counter detectors and compact solid-state lasers. Over the past decade, upconversion has become more prominent in biological sciences as the preparation of high-quality lanthanide-doped nanoparticles has become increasingly routine. Owing to their small physical dimensions and biocompatibility, upconversion nanoparticles can be easily coupled to proteins or other biological macromolecular systems and used in a variety of assay formats ranging from bio-detection to cancer therapy. In addition, intense visible emission from these nanoparticles under near-infrared excitation, which is less harmful to biological samples and has greater sample penetration depths than conventional ultraviolet excitation, enhances their prospects as luminescent stains in bio-imaging. In this article, we review recent developments in optical biolabeling and bio-imaging involving upconversion nanoparticles, simultaneously bringing to the forefront the desirable characteristics, strengths and weaknesses of these luminescent nanomaterials.